Verifying Funds on Checks, 2010 Edition

Last May we found a list of the biggest American banks and investigated each to find if it was possible to verify funds on a customer’s check over the phone. For example, you’re a landlord and you want to know if your iffy tenant, who banks somewhere different than you, wrote you a bad check. You can always go into the bank and try to cash it, but some banks charge you for that. If you deposit it right away, you run the risk of the funds showing up and then going away again.

After that first article was posted, there was more than a little confusion and contradiction in the comments, and I felt it was time to re-investigate. I called each bank and asked them the same question:

Hi, I just have a hypothetical question, if you don’t mind. If a customer of your bank gives me a check, and whether I’m also a customer or not, is there any way for me to find out over the phone if there are enough funds to cover that check?

Just like last time, the banks don’t all agree on the same procedure, and of the ones who won’t allow it, they always defend their practice based on federal law. I have to conclude that reason is false because other banks will do it, and don’t get in trouble for it. My conversation with Citibank was especially interesting, since the customer service representative got audibly offended that I would even suggest wanting to know such private personal details.

Many of the banks also offered the scenario in which you could bring the check writer on the phone with you, and they’d verify funds after getting permission, but I’m working on the assumption that you want to do this privately.

And finally, some banks said they were only willing to verify if the account was valid, open and active.

So, here is the updated table:

Name of Bank

Will Verify Funds

Will Only Verify Validity

Bank of America (CA)

No

Yes

Bank of America (ID, WA)

Yes

N/A

Bank of America (all others)

No

No

Chase

No

Yes

However, since I am a customer, I discovered that I could use the automated system to verify funds on a check, but only once per account.

Smithee formerly lived primarily on credit cards and the good will of his friends. He is a newbie to personal finance but quickly learning from his past mistakes. You can follow him on Twitter, where his user name is @SmitheeConsumer. View all articles by Smithee.

I think if you are a landlord or have a small business – there are agencies that you can reach out to in hopes of fixing this issue. Sometimes a single individual doesn’t have much pull, however an organization is able to make it through some red tape with a little more force.

Given that Bank of America has different policy for ID & WA versus CA I’d assume that some of the differences are based on different state laws. It would be an easy step for a customer rep to claim its federal law when it is in fact a state law.

Great list, that must have taken substantial work!! I don’t know a great deal about this area, but my guess is that policies will vary based on the privacy policies banks are required to implement and disclose to consumers under a 2002 federal law (the Gramm-Leach-Bliley Act).

The GLBA contained provisions designed to put some limits on bank’s abilities to share information with nonaffiliated third parties. However (and I could be wrong here), I believe there are specific exceptions that allow banks to share information to facilitate normal business transactions and to process transactions. See 15 USC 6802(e)(1)-(2). The FDIC’s Privacy Rule Handbook would also be a good place to look on this…

Just because banks *could* share the information, they might nonetheless impose more strict internal privacy policies. Alternatively, financial institutions might have discretionary policies that allow disclosure if there are objective indications the request is legitimate: being made by a company or institution on an authorized consumer transaction.

Since check fraud is a crime, it’s hard to believe that we would get grief from any bank in order to verify funds. Once you hand someone a check to be used a payment for goods or services, you are giving them the right to verify funds. Its interesting that as time goes on, it’s become increasingly difficult to get even simple information: “Is this check made of rubber?” When I call for verification, I don’t want or need any information but this.

For this reason, it seems to me that banks are protecting this information because it also protects their profit margin. Nearly all NSF transactions involve fees on both sides and these fees are where banks make their bank. So what reason do they have to tell me that the check I’m about to cash is going to bounce? Especially when state and federal laws let them hide behind privacy protection laws.

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